Expropriation Acts Ontario: New Law of Expropriation
1.5 Application of Clause 14(4)(b)
Clause 14(4)(b) provides that in valuing land, no account shall be taken of any increase or decree in value resulting from the development, and this principle has now been applied by the Board to permit it to disregard the effect of the development plan on the claimant’s business. Thus, where the scheme depressed sales in the area where the claimant carried on business, the Board based its award under section 19 on the level of sales that would have prevailed but for the plan of redevelopment: Plouffe, at page 47, supra, 1.4.
1.6 Income Tax
Compensation replacing profits is taxable. Thus, where the claimant was awarded compensation for loss of profits arising from the expropriation of a leasehold interest in a parking lot, the amount received was in lieu of profits and would be taxable as income. The Divisional Court reserved a decision of the Land Compensation board which had deducted income tax from the award on the ground that the deduction of the estimated income tax payable on the award would impose a double penalty on the claimant: City Parking Ltd. v. Toronto (City)(1980), 20 L.C.R. 159, 1980 CarswellOnt 752. The court thereby distinguished Florence Realty Co v. R. (1967),  S.C.R. 42, 1967 CarswellNat 346, which was decided under an earlier expropriation statute and represented value to the owner. In that case, the payment was a capital receipt. Damages attributable to disturbance would be in the nature of income where based on loss of profits. Damages for injurious affection and any special difficulties in relocation, depending on the nature of the expenses, would be either capital or income. City Parking reserved the rule which had been laid down in a number of earlier decisions of the Board, and was followed in obiter in Gadzala v. Toronto (City) (2004), 84 L.C.R. 176, 2005 CarswellOnt 6718 (O.M.B.), affirmed on this point (2006), (sub nom, Toronto & Region Conservation Authority v. Gadzala) 89 L.C.R. 81, 43 R.P.R. (4th) 114, 21 M.P.L.R. (4th) 106, 2006 CarswellOnt 2448 (Div. Ct.) at page 115 L.C.R., additional reasons (2006), 90 L.C.R. 264, 47 R.P.R. (4t) 75, 27 M.P.L.R. (4th) 204, 2006 CarswellOnt 4839 (Div. Ct.), leave to appeal to court of appeal denied November 1, 2006 (Ont. C.A.).
1.7 Claims under Subsections 19(1) and (2) Mutually Exclusive
Claims under subsections 19(I) and (2) Mutually Exclusive: Klopp v. London (City) (1987), 15 L.C.R. 347, 1978 CarswellOnt 1716 (L.C.B.), at page 355, approving Gadoutsis v. Metropolitan Toronto (1973), 5 L.C.R. 302, 1973 CarswellOnt 1354 (L.C.B.), at page 306.
2.0 Claims under Subsections 19(1)
The owner must be engaged in business on the land in question as of the date of the expropriation or he or she will not come within the requirement of subsection 19(1). Thus, a claimant was unsuccessful in advancing a claim for business loss when no business was in fact being carried on, at the date of expropriation: Dietrich v. Cataraqui Region Conservation Authority (1973), 6 L.C.R. 278, 1974 CarswellOnt 1311 (Ont. L.C.B.), at page 288. Similarly in Czajkowskyj v. Sudbury (City) (1976), 11 L.C.R. 46, 1976 CarswellOnt 1221 (L.C.B.), at page 55-56, the Board denied compensation for business loss since the claimant had failed to relocate her roominghouse and established a motel, a different operation, at the new location. Further, since it would have been possible to relocate the business existing at the time of the expropriation, no allowance for goodwill was made. See also St. Pierre v. East Parry Sound Board of Education (1977), 13 L.C.R. 184 (L.C.B.), at page 187, where it was found that the claimant’s business was being run at a loss and accordingly denied the claim for business loss.
In Eat’n Putt Ltd v. Ontario (Minister of Transportation & Communications) (1986), 37 L.C.R. 85, 1986 CarswellOnt 3166 (O.M.B.), reserved (sub nom. Funsine Investments Ltd v. Ontario (Minister of Transportation & Communications) (1987), 38 L.C.R. 26, 1987 CarswellOnt 693 (Ont. Div. Ct.), at page 29, the Board denied the claim for relocation costs of the landlord with a reversionary interest in the business on the basis that the business to be considered pursuant to subsection 19(1) of the act was the business in existence at the moment of the expropriation. Note, however, that the Divisional Court held that the landlord did have a right to disturbance damages pursuant to sections 16 and 18 of the act as compensation for the reasonable consequences of the expropriation of its reversionary interest. See Dietrich v. Cataraqui Region Conservation Authority (1973), 6 L.C.R. 278, 1974 CarswellOnt 1311 (Ont. L.C.B.), at page 288; Czajkowskyj v. Sudbury (City) (1976), 11 L.C.R. 46, 1976 CarswellOnt 1221 (L.C.B.), at page 55. See also St. Pierre v. East Parry Sound Board of Education (1977), 13 L.C.R. 184 (L.C.B.), at page 187.
2.2 “Compensation for Business Loss”
The term “business loss” refers to a decrease in net earnings as a result of the relocation, not a decrease in one aspect of the business operation or in total sales. In general, it denotes a loss of revenues following expropriation, while moving, and at the new location. See Veri Produce Co v. Hamilton (City) (No. 2) (1977), 11 L.C.R. 235, 1976 CarswellOnt 1212 (Ont. L.C.B.), at page 240; Lauzon v. Windsor (City) (1975), 7 L.C.R. 11, 1974 CarswellOnt 1284 (Ont. L.C.B.), at page 27. It includes expenses that are directly associated with the move, such as marketing fees or losses from the sale of stock in trade or display goods. In this way, a company that sells swimming pools was able to make up for losses on the sale of exhibition pools at the previous location: Lauzon v. Hamilton (City) (1970), 1 L.C.R. 266, 1970 CarswellOnt 857 (O.M.B.), at page 273. In Lauzon, at page 29, loss of future profits (i.e., after the hearing) were disallowed. See also St. Catharines Crushed Stone v. St. Catharines (City) (1978), 15 L.C.R. 363, 1978 CarswellOnt 1717 (Ont. L.C.B.), at page 381, where a loan was obtained in the course of the claimant’s business to finance a new operation. The interest paid did not constitute a business loss under subsection 19(1).
When an owner sold inventory to cover moving expenses and “to keep the company afloat” at the new location, the Board awarded business loss under subsection 9(1), measured by current interest rates calculated on a compound basis, on the theory that this is what the owner could have earned had he sold his inventory and invested the proceeds: Cornish v. Toronto (City) (19840, 30 L.C.R. 294, 1984 CarswellOnt 1867 (O.M.B.). Varied (1986), 37 L.C.R. 107, 1986 CarswellOnt 701 (Ont. Div. Ct.).
In Vucinic v. Amherstburg (Town) (1997), 64 L.C.R. 223, 1997 CarswellOnt 5873 (O.M.B.), the claimant operated a local hostelry consisting of a restaurant-bar, a motel and marina facilities. The authority expropriated the adjacent property with a historical building in order to preserve the structure. The claimants planned to increase the number of rooms at their motel from 17 to about 35 when they bought the adjacent property. The site was given back to the claimants after the structure had been preserved, but not before postponing their expansion plans by about 7 to 8 years.
The claimants sought compensation for business losses as a consequence of the delayed expansion. The claimants stated that a larger motel, along with an established restaurant and lounge, would be able to draw new kinds of customers that were previously impossible, such as tour groups. While the motel had occasionally reached over 80% occupancy, the authorities contended that expanding the facility would not have been possible. The claimants’ testimony was accepted by the Board, and it was determined that the expansion would have been successful. The Board’s decision to award damages to the claimants in the sum of $506,500 was based in part on the fact that the claimants had previously shown a strong track record for business success..
2.3 Evidence of Business Loss
The Board has frequently remarked on the importance of “satisfactory evidence” to prove any loss, which can be supported by financial records and other documentation. Even so, the Board makes an attempt to exercise its best judgment and issue an award where the information is “sparse”. Compensation allowed: Pugliese v. Hamilton (City) (1972) CarswellOnt 1343 (Ont. L.C.B.), at page 71; Jakubowski v. Ontario (Minister of Transportation & Communications) (1973), 6 L.C.R. 29, 1973 CarswellOnt 1346 (Ont. L.C.B.), at page 42, affirmed (1995), 9 L.C.R. 235 )Ont.C.A.).
Responding parties seem best advised to develop evidence pointing to factors other than the expropriation that may have led to business loss. Where the evidence is unsatisfactory, the Board, on one occasion, recognized an obligation on the part of the authority to conduct an investigation that might be helpful in arriving at a reasonable figure. There, the authority’s failure to undertake any investigation proved costly: Topekian v. Brantford (City) (1973), 5 L.C.R. 289, 1973 CarswellOnt 1353 (Ont. L.C.B.), at page 300.
In Ontario Canoe Trip Outfitters Ltd. v. Ontario (1988), 39 L.C.R. 378, 1988 CarswellOnt 3516, at page 381-382, the Board considered, in addition to evidence of business loss, evidence demonstrating that there were other causes contributing to the business loss, including business difficulties, and, therefore, limited the claimant’s claim to a three-year period following the expropriation; the Board held that the business loss in the year prior to the expropriation was entirely attributable to management problems. In Re Jones (1994), (sub nom. Jones v. Pembroke (City)) 53 L.C.R. 7, 1994 CarswellOnt 5307 (O.M.B.), the Board reduced the claim for business losses in light of the general recessionary market conditions existing over the relevant time, as well as on the basis of the claimant’s own poor business decision to relocate his business to alternative and less suitable premises when the authority had offered to lease back the existing premises. Other cases where claims have been dismissed for lack of evidence include: Tait v. Simcoe (County) (1971), 1 L.C.R. 303, 1971 CarswellOnt 845 (O.M.B.), at page 309; St. Pierre v. East Parry Sound, supra, 2.1; King v. St. Catharines (City) (1978), 16 L.C.R. 173, 1978 CarswellOnt 1723 (Ont. L.C.B.).
2.4 Duty to Mitigate
The claimant may not decide upon a course of action which does not lead to mitigation and then ask for damages as if they have been mitigated. The duty to mitigate will be found to have been compiled with, however, where the authority fails to show that any actions taken by the owner were not designed to mitigate, e.g., Fifield v. Ontario (Minister of Transportation & Communications) (1972), 2 L.C.R. 334, 1972 CarswellOnt 1317 (Ont. L.C.B.), at page 339; Topekian v. Brantford (City) (1974), 5 L.C.R. 289, 1973 CarswellOnt 1353 (Ont. L.C.B.), at page 301.